Car loan taken out in customer’s name without his knowledge

Categories:

Fraud & scams, Lending,

Summary:

In January 2021, someone took out a $12,000 car loan for from the bank in Kody's name. Several repayments were taken from Kody's bank account with a different bank, although most were reversed because of insufficient funds in his account. The car, which was not registered in Kody's name nor in his possession, was recovered by the bank and sold at auction in May 2022. The bank pursued Kody for the outstanding loan balance of $11,000. Kody said he knew nothing about the car or the loan, and reported the matter to police as a case of fraud.

Published:

July 2025

Our investigation

We examined the loan application and noticed Kody’s contact details were incorrect, and that the supporting bank statements were clearly fraudulent. The bank relied on a biometric video of Kody, a photo of his driver licence, and a loan agreement and direct debit form, both showing his name and signature, to establish that he had applied for the loan. Kody said the signature was not his. He said he had been tricked by his friend into appearing in the video, and he would not have agreed to be filmed if he had known the video’s true purpose – to help secure a loan without his knowledge. We found nothing about the video to suggest it was made for the purpose of securing the loan. We therefore considered the bank could not establish Kody took out the loan.

Kody was aware of only two payments to the bank, whereas 20 payments had been made and another 51 reversed. His failure to make inquiries about these payments did limit the extent of the bank’s responsibility for the stress and inconvenience he subsequently experienced. However, we considered the bank should have investigated the fraud allegation earlier, and its failure to do so, or more thoroughly, prolonged Kody’s stress and inconvenience.

The bank offered to write off the debt and ensure his credit record was unaffected. It also offered $1,160 to cover the payments taken from his account, along with $500 compensation for stress and inconvenience, and for not investigating the fraud allegation sooner and more thoroughly.